What Does ACH Mean in Banking Terms?

What Does ACH Mean in Banking Terms?

The Automated Clearing House, or ACH, is a financial network that oversees electronic money transfers between banking institutions, according to About.com. ACH transactions allow financial institutions to quickly send money from one account to another, eliminating paper checks and business fees incurred by processing credit card payments.

This expansive network facilitates common transactions, such as payroll direct deposit, recurring bill payments, business-to-business payments and credit card purchases, according to the National Automated Clearing House Association. An originator starts the transaction by requesting a deposit or payment, and the banking institution sourcing the account transmits information in batches to the receiving institutions. NACHA regulations require the institutions to settle each transaction within one or two business days, depending on the payment method.